Over the past three months, Nvidia's (NASDAQ:NVDA) stock has been upgraded by several financial services firms including Goldman Sachs (GS), Citigroup (C), and Bernstein, while some others have downgraded the stock, such as Pacific Crest. In an article published in December, last year, I said Nvidia's stock could scale new highs if the company's revenue continues to grow at a CAGR of 20% plus in the foreseeable future. At that time, the stock created a new high around $120, before correcting almost 20% afterwards.
I also cautioned investors that the stock could go through spine-chilling volatility, and that's exactly what is happening now. The commentaries of several sell-side analyst firms fueled the extent of volatility beyond what happens under normal circumstances. My medium-term target for the stock is $200+, albeit with continued volatility. The new catalyst for the stock will be the availability of its HGX-1 platform at the hyperscale space.
Nvidia: Revisiting the Bull Thesis
My investment thesis was based on the expectation that Nvidia's revenue will grow at a CAGR of 20% plus in the next three years. The primary revenue growth driver will be the expanding application of artificial intelligence (AI) and/or deep learning (DL) across various industries. Let's focus on Nvidia's competitive advantage in AI/DL.
Nvidia's DGX-1 platform is its trump card to lead the next generation of AI-wave leveraging the TensorFlow software library, originally developed by Google (GOOGL)(GOOG). Nvidia recently launched a partner program with hyperscale vendors, such as Foxconn, Inventec, Quanta and Wistron, for its HGX-1 AI reference platform. What's the difference between DGX-1 and HGX-1? Well, HGX-1 is the hyperscale version of the DGX-1 platform. The launch of the partnership program will have a strong and sustainable impact in the HPC (high performance computing) space via hyperscale players.
Investors need to understand how
